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Startup Company Seeks RFID and Other Patents
RPX Corp., which has already signed on a number of vendors with RFID products as members, is aggregating patents to protect high-tech companies from litigation.
Apr 08, 2009—RPX Corp., a startup firm that is buying various patent portfolios, including those involving radio frequency identification, in order to help high-tech companies fight patent assertions and associated litigation costs, has added five more member companies to its ranks, thus bringing the total number up to 11 since it began conducting business in November 2008. To date, RPX owns patents valued at more than $70 million, and has signed on as member companies Cisco, IBM, LG Electronics, Panasonic, Philips, Samsung and Seiko-Epson (all of which sell hardware, software or services involving RFID), as well as Shortel, TiVo and Vlingo.
The firm is doing what John Amster, RPX's co-CEO, calls defensive patent aggregation—that is, purchasing patents on behalf of its member companies in order to protect them from the growing number of non-practicing entities (NPEs) that acquire patents not to manufacture or market a patented invention, but to sue businesses they allege are infringing on the patents. Moreover, since NPEs do not sell products or services, they do not infringe on patent rights. Thus, companies are unable to counter-assert patents (which often occurs in patent battles among competitors).
According to Amster, there are more than 220 identified NPEs in the United States, with roughly 350 cases involving perhaps as many as 1,000 defendants filed by NPEs in 2008. "Just the legal cost alone is around $1 billion," Amster states, "and that is just in the cost, not any settlements. With that, it is probably a lot more—closer to $5 billion."
In the past decade, NPEs have raised in excess of $6 billion in private capital to acquire patents. What's more, offensively initiated lawsuits by NPEs in the United States grew nearly 300 percent during this period, and now represent 16 percent of all U.S. patent litigation, according to PatentFreedom, a research organization focused on the activities, techniques, staff, funding and patent holdings of NPEs. The rapid growth of patent lawsuits involving NPEs, PatentFreedom reports, has been fueled by the increased numbers of patents awarded, as well as the promise of big returns on relatively modest costs (the median price for a patent is approximately $100,000). A powerful example of that is the $612 million payment made by Research in Motion in 2006 to patent-holding company NTP.
Amster states that his firm is not out to sue anyone to make money. "We will never assert out patents to anybody; we'll always wear the white hat and will never threaten litigation, " he says. Instead, RPX's plan is to make money from the fees its members pay. The company is backed by blue-chip venture capital firms Kleiner Perkins Caufield & Byers and Charles River Ventures. Members pay an annual fee ranging from $35,000 to $4.9 million, based on a rate card that takes a member's operating income into account.
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